Legislature(2023 - 2024)ADAMS 519
04/29/2024 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB122 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 169 | TELECONFERENCED | |
| + | HB 122 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 29, 2024
9:07 a.m.
9:07:10 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:07 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
MEMBERS ABSENT
Representative Bryce Edgmon, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Frank Tomaszewski
ALSO PRESENT
Zach Young, Staff, Representative Frank Tomaszewski; Bill
O'Leary, Chief Executive Officer, Alaska Railroad
Corporation; Preston Carnahan, Regional Vice President,
Destinations, Royal Caribbean Group.
PRESENT VIA TELECONFERENCE
Becky Long, Self, Talkeetna; Jillian Simpson, President and
CEO, Alaska Travel Industry Association; Tom Tougas, Self,
Seward; Scott McCrae, President and CEO, Explore Fairbanks,
Fairbanks; Laura Stats, Self, Juneau; Margaret Stern,
Programs and Communications Director, Susitna River
Coalition, Talkeetna; Lois Epstein, Self, Anchorage; Randy
Ruaro, Executive Director, Alaska Industrial Development
and Export Authority.
SUMMARY
HB 122 RAILROAD CORP. FINANCING
HB 122 was heard and HELD in Committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 122
"An Act authorizing the Alaska Railroad Corporation to
issue revenue bonds to finance the replacement of the
Alaska Railroad Corporation's passenger dock and
related terminal facility in Seward, Alaska; and
providing for an effective date."
9:08:34 AM
ZACH YOUNG, STAFF, REPRESENTATIVE FRANK TOMASZEWSKI,
explained that the bill dealt with railroad revenue bond
authorizations as well as some other bond authorizations
for the Alaska Industrial Development and Export Authority
(AIDEA). The bill would provide for the financing of the
replacement of the passenger dock and cruise ship terminal
in Seward. The current dock was built in the early 1970s
and was in a state of somewhat disrepair. The number of
loads on the dock had been limited and money had been
invested to enable the dock to remain functional in the
interim prior to the dock replacement. The bill brought
forward an additional $75 million in bond authorization. In
2022, there had been $60 million in bonds authorized but
none of the bonds had yet been issued. The initial project
had been slightly smaller, but a new cost analysis had been
done with a refined scope. The new estimated dock
replacement cost was $137 million. The project would
commence in the fall of 2025.
Mr. Young reviewed the sectional analysis (copy on file):
Section 1. Beginning Page 1, Line 9 Authorizes the
Alaska Railroad to issue and additional $75 million in
bonds up to a total of $135 million to replace the
passenger dock and related terminal facility in
Seward. Ensures that the passenger dock must
accommodate Alaska marine highway vessels with side
loading doors.
Section 2 Beginning Page 2, Line 15 Authorizes the
Alaska Railroad to issue up to $58 million in bonds to
complete phase one of the port MacKenzie Railroad
extension.
Section 3 Beginning Page 3, Line 7 Authorizes AIDEA to
issue $300 million in bonds for statewide critical
minerals and rare earth metals infrastructure
projects.
Section 4 Beginning Page 3, Line 27 Sets an immediate
effective date.
Mr. Young shared that four amendments to the bill had been
adopted by the House Transportation Committee. He detailed
that the first amendment decreased the bonding request from
$90 million to $75 million. He explained that the initial
scope of the project was thought to be more costly. The
second amendment was offered to ensure that Alaska Marine
Highway System (AMHS) vessels would be able to use the
dock. The current design would enable the dock to
accommodate AMHS vessels and the loading of vehicles on
those vessels. There were currently no AMHS schedules that
ended or originated in Seward, but the project would keep
it open as an option.
Mr. Young explained that the third amendment added $58
million in bond authorization for phase 1 of the Port
MacKenzie rail extension. The fourth amendment added $300
million in bond authorization for AIDEA to critical
minerals and rare earth metal infrastructure projects.
9:13:34 AM
Mr. Young provided a summary of the legislation. The bill
had several different components of bonding authority that
would allow state quasi-governmental organizations to
complete infrastructure projects.
BILL O'LEARY, CHIEF EXECUTIVE OFFICER, ALASKA RAILROAD
CORPORATION, appreciated the opportunity to speak to the
committee about an issue that was important to the Alaska
Railroad and visitor industry. He stated it was truly a
statewide project that impacted Southeast Alaska up to
Interior Alaska. He provided a PowerPoint presentation
titled "Alaska Railroad: Seward Passenger Dock and Terminal
Replacement Project," dated April 29, 2024 (copy on file).
He began on slide 2 and relayed that the Alaska Railroad
owned three docks in Seward including a freight dock
(currently undergoing improvements), a coal export loading
facility, and the passenger dock. He detailed that the
railroad was putting a substantial amount of money into the
dock annually for maintenance and it was reaching the end
of its useful life. He reiterated that the dock was
critical infrastructure for the state and visitor industry.
9:15:47 AM
Mr. O'Leary moved to slide 3 and discussed the funding and
timeline. The railroad had worked on the project for a
number of years with multiple cruise lines, primarily Royal
Caribbean Group. He noted that a representative from the
Royal Caribbean Group was also present to support the
legislation. He relayed there had been a couple of false
starts on the project leading to bond authorization in
2022. The railroad was requesting an additional $75 million
in bond authorization. He pointed out that the Alaska
Railroad was owned by the state but it was separate and
distinct from the state from the perspective of its legal
and financial obligations. He underscored that no state
revenues would be used to pay the debt. He explained that
the debt would be paid with from dock revenues from the
Alaska Railroad. He noted that the railroad's enabling
statutes required any public debt issuance to be approved
by the legislature.
Mr. O'Leary relayed that the railroad had a project and the
alignment necessary to move forward. He stated that the
bond authorization was critical to complete the project.
The project cost was $137 million to be funded with a
combination of tax exempt bonds and railroad equity/cash.
The security for the debt would be a long-term berthing
agreement with the Royal Caribbean Group that was close to
completion. There was alignment between the railroad as
owner and operator of the dock, the Seward Company as the
developer, and the Royal Caribbean Group as the prime user
of the dock. There would be substantial changes to the dock
to account for continued growth in the cruise industry for
Southcentral and other areas. He explained it would involve
the need for railroad assets such as passenger cars to
support some of the growth coming out of Whittier and
growth planned for Seward.
9:18:50 AM
Mr. O'Leary turned to slide 4 showing an image of the
existing dock and terminal facility, which was located on
the dock. Slide 5 showed a mockup of the proposed new dock
including fixed and floating components and a larger
improved terminal building on land.
Mr. O'Leary provided closing comments on the project. He
underscored that no state funds would be used for the
project. The revenues from the dock would repay the debt.
The debt was secured by long-term berthing agreements with
the Royal Caribbean Group. He relayed that the project was
very important to the Alaska Railroad and the visitor
industry.
9:20:01 AM
Co-Chair Foster moved to invited testimony.
PRESTON CARNAHAN, REGIONAL VICE PRESIDENT, DESTINATIONS,
ROYAL CARIBBEAN GROUP, thanked the committee for the
opportunity to support the bill. He shared that Royal
Caribbean Group was a global company that had operated in
Alaska for many decades out of the Port of Seward. The
company and its guests loved Alaska and the company looked
forward to seeing the project move forward. The cruise line
as the dock user and railroad as the operator were closely
aligned on the project. He stated it was the right solution
at the right time for Alaska and the company.
9:21:49 AM
Co-Chair Foster OPENED public testimony.
BECKY LONG, SELF, TALKEETNA (via teleconference), spoke to
Section 3 of the AIDEA bonding amendment. She stated that
the provision giving AIDEA $300 million in bonding
authority was too broad and represented a blank check
without public oversight or public transparency. She stated
there were no precise definitions for critical mineral and
rare earth infrastructure. Additionally, there was no
explanation on the limit or how often bonding would occur.
She remarked there had been recent revelations about AIDEA
transgressions by economists, nongovernmental
organizations, the public, and media sources that showed
AIDEA had a lack of transparency and documented job
creation inaccuracies and should not get the blank check.
She stated that AIDEA loan practices had been shown to be
unnecessary, wasteful, and expensive. She suggested that a
legislative committee should look to reform AIDEA's
practices for better public policy.
9:24:27 AM
JILLIAN SIMPSON, PRESIDENT AND CEO, ALASKA TRAVEL INDUSTRY
ASSOCIATION (via teleconference), spoke in favor of the
bill to support the Alaska Railroad in securing financing
to replace the dock in Seward. She relayed that Alaska
Travel Industry Association (ATIA) was a trade association
with over 600 member businesses working in Alaska tourism
across the state. The association supported transportation
initiatives that enhance and support tourism opportunities
and improve visitor industry access. She stated that the
dock in Seward was a vital piece of infrastructure for a
significant portion of the state's summer visitors. In
2023, the state saw over 1.7 million cruise ship visitors,
representing about 60 percent of the summer visitation and
half of the year-round visitation. She elaborated that
almost one-third of the total cruise ship passengers cross
the Gulf of Alaska to Southcentral. She detailed there had
been approximately 191,000 passengers in Seward and many of
the passengers embarked on land tours. The direct spend by
all visitors in 2022 was $3.9 billion with an estimated
economic impact of $5.6 billion. Of the direct spend, cross
gulf cruise passengers were responsible for almost $500
million in direct spending in Alaska. She noted the amount
did not include the cost of the cruise or travel to Alaska.
The association supported and welcomed the significant
investment in the Seward dock and terminal. She concluded
that the investment would provide statewide benefits to
local economies in all five regions of the state.
Representative Galvin asked if 191,000 individuals were all
Royal Caribbean passengers.
Ms. Simpson responded that the 191,000 individuals were all
cruise ship passengers from Royal Caribbean, Norwegian
Cruise Line, and potentially some smaller cruise companies.
9:27:42 AM
TOM TOUGAS, SELF, SEWARD (via teleconference), spoke in
full support of the bonding for the Alaska Railroad. He
shared that he had lived in Seward for 32 years and
operated a company called Major Marine Tours. The Alaska
Railroad dock was falling apart and without the dock Seward
would be greatly negatively impacted. He detailed that
Seward was the gateway to the Railbelt to Anchorage,
Denali, and Fairbanks. He explained that the absence of the
dock would impact all of the communities along the
Railbelt. He stated that Royal Caribbean was unique in its
continual support for local entrepreneurs. The dock also
supported the longshoremen responsible for tying up the
ships and loading passenger baggage on and off the ships.
He remarked that the bill was an important step forward for
the Alaska Railroad and Royal Caribbean. He fully supported
the bill.
Representative Josephson asked if Seward residents worried
about excess. He asked if there was a point where too much
of a good thing could be a problem. He used Juneau as an
example where there was substantial support for the cruise
industry, but he was told that five cruise ships per day
seemed to be enough.
Mr. Tougas answered that the dock was located away from the
town of Seward; therefore, the local community was not as
impacted. He explained it was a turn port where passengers
disembarked and boarded. He detailed that during the night
there was a lot of unloading of baggage but because the
dock was located away from town, the community was not
impacted. The vast majority of the passengers were on
trains or buses by the time most Seward residents woke up.
He noted that one of the limiting factors in Seward was the
limited number of hotel rooms. He noted that people did
stay in Seward, there were rental car companies, and people
went to the Sealife Center, but most people coming off the
ships were on their way north by 10:00 a.m.
9:31:08 AM
SCOTT MCCRAE, PRESIDENT AND CEO, EXPLORE FAIRBANKS,
FAIRBANKS (via teleconference), supported the legislation.
He explained that Explore Fairbanks was the destination
marketing organization for Interior Alaska comprised of
about 360 partners. The project would benefit Seward and
the entire Railbelt. He relayed that cruise van tour
passengers accounted for 45 percent of the summer visitors
in the Interior. He highlighted the impact to the economy
including hotels, restaurants, shopping, etcetera. He
remarked that many visitors who come to Alaska turned into
repeat visitors. He stated it was a good project, good for
Alaska, and had the company's full support.
Representative Stapp encouraged Mr. McCrae to invite
visitors to come to Fairbanks.
9:33:17 AM
LAURA STATS, SELF, JUNEAU (via teleconference), was
completely supportive of the funding for the Alaska
Railroad dock. She stated it was a well thought out bill
and the dock was needed. She was adamantly opposed to the
AIDEA amendment that had been added by the House
Transportation Committee. She stated that in mid-March in
the final half hour of the committee meeting,
Representative McKay hastily announced the amendment. She
believed other committee members had been caught off guard
by the amendment and there had been no public comment on
the item. She stated that with the $300 million
preauthorization, AIDEA would not be required to have its
projects open to the public nor would the legislature
really know what projects the agency would be working on.
She encouraged the committee to strike the AIDEA portion of
the bill. She thanked the committee.
9:35:35 AM
MARGARET STERN, PROGRAMS AND COMMUNICATIONS DIRECTOR,
SUSITNA RIVER COALITION (SRC), TALKEETNA (via
teleconference), explained that the SRC commented on behalf
of more than 14,000 individuals, groups, and businesses who
support its work. She relayed that SRC supported the
communities and ecosystems sustained by the resources of
the Susitna River watershed. She shared that SRC was
opposed to the bill provision that would provide AIDEA with
$300 million in bonding authority for anything related to
critical mineral development. She stated the provision was
an unnecessary and a seemingly unrelated add-on to the bill
that had minimal opportunity for public comment. She
remarked that it reflected an open-ended permission, which
amounted to a blank check. She added that AIDEA had a poor
track record of completing projects with minimal to no
public involvement.
9:37:04 AM
LOIS EPSTEIN, SELF, ANCHORAGE (via teleconference), shared
that she is a licensed engineer, small business owner, and
consultant for tribal and community entities on mining
projects in the Ambler mining district and near Haines. She
opposed the bill provision giving AIDEA $300 million in
bonding authority for critical mineral development. She
stated that there was a great deal of misinformation
regarding critical minerals and the need for mining those
minerals in Alaska. She remarked that the industry's
frequent statements that the U.S. needed increased mining
in Alaska to transition to clean energy and that the
minerals should be produced in the U.S. should not be
accepted uncritically. For example, Chile, Australia, and
Peru had the greatest copper reserves globally. She
remarked that copper smelting largely took place in China
and the U.S. would still be dependent on China for the
minerals. She stated that in terms of domestic production,
Southwestern U.S. and Utah copper mines located closer to
population centers that supplied workers and copper
smelters, making mining in the other locations cheaper when
compared to Alaska. Additionally, she stated that the
Southwestern mines would likely operate much longer than
the 13-year projected lifetime in the Ambler mining
district.
Ms. Epstein stated it was inaccurate to assume that
minerals must be mined to ensure they were available for
use in clean energy. She relayed that there were at least
three options that reduced the need for minerals before
turning to mining, especially in ecologically sensitive
areas important to subsistence in Alaska. She listed the
alternative options as recycling, redesigned products, and
recovery from tailings. She elaborated on each of the
options. She highlighted that AIDEA had a small board of
directors appointed by the governor who were not approved
by the legislature. She stated that some of the members may
have conflicts of interest and may not have enough
expertise to oversee costly loan and bond decisions. She
urged the committee to remove the AIDEA provision in the
bill. Additionally, she asked the committee to consider
amending AIDEA's statute so that AIDEA had an approved
decision making structure before it used bonds or loans and
Alaskan's money.
Co-Chair Foster CLOSED public testimony.
9:40:52 AM
Representative Cronk asked if there was anyone from AIDEA
online.
Co-Chair Foster replied affirmatively and listed
individuals available online.
Representative Hannan stated her understanding that
Carnival Cruise Line would be the long-term tenant at the
Seward dock. She asked Mr. O'Leary how long it would take
to pay off the bonds and if the lease agreement followed
suit.
Mr. O'Leary replied that the Railroad was currently
contemplating a 30-year agreement with Royal Caribbean that
would match precisely with the term of the debt.
Representative Hannan asked if the lease agreement
precluded competing cruise ships from using the dock. She
observed that it appeared the dock would have a double
berth. She asked if the dock use was within the railroad's
authorization capacity.
Mr. O'Leary answered that the goal was to have an open dock
that Royal Caribbean would have preferential access to. The
railroad would be actively soliciting and trying to bring
additional cruise lines to the facility.
Representative Hannan asked if the Alaska Marine Highway
System (AMHS) would be allowed to use the dock at the same
time as tour boats. She understood there were some security
protocols in terms of how a dock was secured when cruise
ships were in port, but that AMHS did not have the same
protocols.
Mr. O'Leary replied that he did not know. He relayed that
an amendment to the bill specified that the structure of
the dock would be able to accommodate AMHS traffic, but to
the best of his knowledge there had been no further
discussion about specifics.
Representative Hannan knew that an addition to the bill in
the House Transportation Committee included Section 2. She
asked if the Alaska Railroad Board had been seeking bonding
authority for $58 million for the Port MacKenzie rail
extension.
Mr. O'Leary replied that the railroad had been supportive
of the Port MacKenzie rail extension project. He detailed
that it had originally been a Mat-Su Borough project that
received around $180 million in state general funds
culminating around 2014, but state funding had dried up and
the project had not been completed. The railroad was
supportive of infrastructure in the state and additional
rail infrastructure in the specific area. The railroad did
not make a request for the specific bond authorization [in
the current version of the bill]. He relayed that should a
revenue source materialize, the railroad would be
interested in utilizing it. He explained that in order to
issue bonds for a project like the Port MacKenzie
extension, there would have to be an incremental revenue
source related to the particular project, which had
currently not been identified.
9:46:01 AM
Representative Hannan asked if $58 million would complete
the railroad extension and allow the railroad to pursue a
financial arrangement with someone. Alternatively, she
asked if $58 million was merely putting more money into a
project without a tenant and it would take more funding to
complete it and make it economic to produce some revenue.
Mr. O'Leary responded that the railroad currently estimated
the completion of the Port MacKenzie rail extension would
cost about $275 million to $300 million.
Representative Ortiz referenced Mr. O'Leary's earlier
statement that the Seward dock was intended to be used by
other cruise companies in addition to Royal Caribbean. He
asked for the number of ports of call scheduled for Seward
and if Royal Caribbean currently made up 100 percent of the
total. He asked about a weekly average.
Mr. O'Leary recalled it was around 80 to 90 berthings at
the Seward dock. He explained it was a turn port where the
cross gulf cruises terminate. He detailed that the Royal
Caribbean Group had been the largest user. In 2023, other
companies using the dock included Norwegian Cruise Lines
and Viking Cruise Lines. He noted that Norwegian Cruise
Lines was moving to the new dock currently under
construction in Whittier.
Representative Ortiz stated his understanding that the dock
was open to other cruise lines outside of Royal Caribbean.
Mr. O'Leary responded affirmatively.
9:49:34 AM
Representative Galvin asked how many of the 80 to 90
berthings were Royal Caribbean.
Mr. Carnahan responded the currently there were four ships
from the Royal Caribbean Group, Royal Caribbean
International, Celebrity Cruise Lines, and Silversea
Cruises resulting in approximately two ships weekly through
the season (approximately 40 berthings in a season). He
added that Seward is a wonderful place and although there
were other options to go to Whittier, Royal Caribbean Group
wanted to be in Seward. He elaborated that out of the
roughly 200,000 guests in the future, Royal Caribbean's
commitment to fully cover the bond was about 75 percent of
the 200,000. The company was committing to ~140,000 going
through the Port of Seward and the remainder would be
comprised of the other aforementioned third parties. He
expounded that "we're looking at one or two days a week on
one side of the pier that this looks at." In terms of the
ability to commercialize the facility, there was a lot of
opportunity. He relayed that Royal Caribbean regularly
worked with and had agreements with all of the major cruise
lines. He stated the companies worked together to visit the
same port.
Representative Galvin thought it sounded like the Royal
Caribbean Group would account for about half of the
berthings in the coming summer and the other half would be
from other companies. She thought about the importance of
competition to keep the price down and to ensure there was
equal access to all. She appreciated there had been an
amendment to the legislation to factor in AMHS guests. She
thought it sounded like there were still details to be
worked out regarding security issues. She recognized that
Royal Caribbean clearly had one partner that was ready to
stand in. She asked if there were other partners that were
part of the consideration and if there had been thought
given to having an agreement that was inclusive of all
potential users.
9:53:01 AM
Mr. O'Leary responded that the Royal Caribbean Group would
be committing to bringing enough passengers and revenue to
fund the debt service on the Seward dock. The railroad's
goal was to bring additional passengers and users to the
dock; however, they were not part of the potential calculus
of the arrangement. He relayed that from the railroad's
perspective and mission and the ability to issue tax exempt
debt to support the dock, it was clear the dock needed to
be available to other cruise lines and users. The railroad
had focused primarily on the Royal Caribbean Group for the
particular arrangement as the largest user committed to a
30-year period. He relayed that the railroad would be
delighted to have other agreements with other cruise lines,
but those had not yet manifested.
Representative Galvin asked if the railroad would be
responsible for lining up the other ships once the dock was
built. Alternatively, she asked if Royal Caribbean be
responsible for working with the other cruise lines. She
asked who would be responsible for dictating the cost and
usage once the dock was built.
Mr. O'Leary replied that the railroad would be.
9:55:28 AM
Representative Josephson asked how the bond would be paid.
He asked if a special fee would be collected that was part
of the agreement with Royal Caribbean.
Mr. O'Leary replied affirmatively. There would be an
improvement fee included in the agreement with Royal
Caribbean. The fee would also be charged to other facility
users as well.
Representative Josephson asked if the cruise industry was
making any of its own capital investment.
Mr. O'Leary replied that the cruise industry would pay the
improvement fee, but no direct capital investment.
Representative Josephson asked for verification that the
original bill did not contain Sections 2 or 3.
Mr. O'Leary agreed.
Representative Josephson referenced the $58 million [Port
MacKenzie] railroad extension. He stated that Mr. O'Leary
had noted that previously there was $100 million spent to
clear a right-of-way for a future railroad extension. He
asked if the right-of-way was currently mostly clear.
Mr. O'Leary responded that $180 million or so in state
funds were used to build the embankment and almost
everything with the exception of putting the rail down. He
noted there was still some dirt work to be done. The
completion of the project would be to connect Port
MacKenzie to the Alaska Railroad's main line around the
Houston, Alaska area.
Representative Josephson asked how the $58 million figure
in the bill -that according to Mr. O'Leary would leave the
project short $250 million or more - had been determined.
Mr. O'Leary answered that the $58 million was a number the
railroad had developed as a next phase that could be done
in the absence of full funding to complete the project.
9:58:40 AM
Representative Josephson asked if the current berthings in
Seward were 80 to 90.
Mr. Carnahan replied affirmatively.
Representative Josephson estimated it was less than one per
day in a typical summer. He relayed that he kayaked in
Resurrection Bay and was interested to know how that would
be impacted. He was trying to get a sense of the number of
cruises there would be in the future.
Mr. Carnahan responded that Royal Caribbean Group planned
to bring larger ships as opposed to more. He explained that
there were a number of reasons, many related to efficiency,
that the existing ships could not do long distances over
time. The company expected the current 2,000 passenger ship
to be replaced by a 4,000 passenger ship. The number and
frequency of the calls would not increase, but the number
of guests would increase.
Representative Josephson clarified that he was trying to
get a sense of competing interest for the space. He asked
if a Juneau resident was sympathetic to the community of
Seward not having too many cruise ships, the individual
should not have too much anxiety for the City of Seward. He
stated his understanding that the cruise ships would be
larger, but there would not necessarily be three to five
cruise ships coming to the port.
Mr. Carnahan answered that Juneau as a port of call was a
vastly different situation where historically almost all
cruises came through the city. In Royal Caribbean's work
and discussion with the City of Seward and long-term
residents, they were welcoming to the plans including the
frequency and size of ships. The company was looking to
work with the local companies and businesses to build out
new capacity if it was what they wanted. Royal Caribbean
was also looking to work with the railroad to add cars and
work with Premier [Alaska Tours] to add buses to bring
guests away if desired.
10:01:19 AM
Representative Coulombe referenced Mr. O'Leary's earlier
statement that the port was currently at the end of its
life. She asked if the railroad was trying to fix capacity
or if the dock was falling apart and was a safety hazard.
Mr. O'Leary replied that the dock was over 50 years old and
was reaching the end of its life. The railroad was
investing $2.5 million in the current year into reinforcing
the dock pilings to ensure it was safe for use until the
new dock could be put in place. He relayed that the new
dock would be an improvement and upgrade, but the driving
force behind the project was to replace an asset that had
reached the end of its useful life.
Representative Coulombe referenced alignment on the
project. She assumed the City of Seward supported the
project, but she wondered if the city had any concerns that
were addressed.
Mr. O'Leary answered that the city was supportive of the
project and the city manager had testified on the city's
support in previous committees. He noted the individual had
been unavailable for the current meeting.
Representative Coulombe noted the aggressive timeline with
construction beginning in 2025 and the dock opening in the
spring of 2026. She asked if the dock would be shut down
during construction.
Mr. O'Leary responded affirmatively. He explained that
demolition of the existing facility would begin at the end
of the season in 2025. He explained that parts of the new
dock would be built offsite and floated into place and the
new dock would be ready to go by April of 2026.
10:04:38 AM
Representative Cronk asked recalled when the legislature
had approved $60 million two years earlier. He wondered how
the cost increased from $60 million to $137 million.
Mr. O'Leary clarified that the $60 million was the bond
portion of an $80 million to $90 million project in the
2022 timeframe. He explained at that point the railroad had
not achieved full alignment on the scope of what would be
necessary and had not accounted fully for the substantial
construction inflation.
Representative Cronk asked who owned Royal Caribbean.
Mr. Carnahan replied that the company was publicly traded.
Representative Cronk asked if the company was American or
foreign owned.
Mr. Carnahan answered that there were a number of
institutional and private investors on the U.S. public
stock market.
Representative Cronk expressed frustration that no funds
would be invested by Royal Caribbean and the state would
build the dock so the cruise company would come even though
it was already coming. He remarked there was no vision for
any other [rail] extension. He asked, "are we working to,
if we have them, they can build it?" He referenced
transportation, military, and minerals. He clarified that
he was fully in support of tourism, but much of that money
did not remain in Alaska. He remarked there was the same
argument about the state not wanting to do anything for a
mineral company that may be Canadian owned because the
money would leave the state. He stated there was
substantial interest in having the Port MacKenzie rail
extension completed and a northern rail extension. He
remarked that there were people who were willing to pay for
those things. He was frustrated to hear the railroad was
not ready to do anything in that matter, whereas it was
ready to build a $160 million dock. He was not saying it
was not needed. He was frustrated there could be a focus on
tourism but not minerals. He highlighted that Fort Knox
Mine in Fairbanks created $700,000 per year in jobs,
thousands of related jobs, and $250 million in tax revenue
for the borough over the past 20 years, but the state did
not have the vision. He stated that it was moving Alaska
forward and the rail transportation was key, but the state
refused to acknowledge it.
10:08:23 AM
Mr. O'Leary understood the frustration. The critical
difference with the bond authorization for the Seward dock
compared to some of the other rail extensions was that
there was a customer willing to sign up for a 30-year
agreement, which guaranteed the project could be completed.
He explained that it allowed the railroad to go to the
financial markets, obtain a bond, and complete the project.
Whereas, with some of the larger rail extensions such as
Port MacKenzie or the northern rail extension, there was
significant interest, but it had not coalesced to the point
where people would guarantee usage and a certain amount of
annual revenue that would provide the railroad with the
ability to finance the projects. He relayed that the
railroad was a small organization with a small balance
sheet that did not have the ability to do a "build it and
they will come" approach of the magnitude necessary for the
rail extensions.
Mr. O'Leary relayed that the Seward dock project had a
publicly traded company with billions of dollars in revenue
that was committing to paying all of the debt service on
the project moving forward. The agreement allowed the
railroad to move forward on the project. He understood
Representative Cronk's frustrations about the rail
extensions. He stated that the railroad was a large
supporter of infrastructure and believed the primary thing
holding Alaska back was the lack of infrastructure to a lot
of places. He communicated that in order to move forward on
the rail extensions, the railroad needed partnership
through the customers willing to sign longer term
agreements or via the state or federal government in the
form of a portion of the funding. The railroad was
currently looking for federal grants for rail extensions,
but a 20 to 40 percent match was far more than the railroad
could handle.
Representative Cronk referenced public testimony in
opposition to the bill provision related to AIDEA. He
requested to give AIDEA an opportunity to defend itself.
Co-Chair Foster asked AIDEA to address any concerns that
had been raised.
RANDY RUARO, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY (via teleconference),
stated there had been quite a few inaccuracies provided to
the committee about AIDEA's process and the amendment. He
relayed that AIDEA's process was open and transparent. He
reported that AIDEA had over 120 pages of regulations and
statute that guided its actions and its board meetings were
all publicly noticed subject to the Open Meetings Act.
Additionally, the corporation's mission set by the
legislature was to provide jobs and economic development.
He stated that AIDEA had a good track record of that with
Red Dog and other projects. The agency's loan participation
program at nearly half a billion dollars had a zero default
rate. He was happy to send a copy of the agency's statutes,
regulations, and meeting notices to the individuals who
testified.
Mr. Ruaro addressed the Section 3 amendment in the bill. He
relayed that two things had occurred at the federal level
driving the need for the amendment. First, the rare earth
supply was centralized in China, and it was not a good
national defense or state policy to be reliant on
production in China. He explained that China had already
taken legislative action to limit and stop exports of
certain rare earth minerals including germanium to the U.S.
and other countries. There were over 3,400 defense systems
in the U.S. military that used rare earth minerals. He
stated it was critical for national defense that the
minerals were produced domestically. He stated they should
be produced in Alaska under the strictest standards in the
world as opposed to being produced in China using certain
power sources that resulted in a haze of black soot falling
on the Alaskan Arctic.
Mr. Ruaro addressed the second item at the federal level.
He explained that the federal Department of Energy had made
roughly $290 billion in loans and loan guarantees available
under Title 17 to state energy financing institutions. He
believed AIDEA was one of 13 entities in the U.S. that had
qualified. He detailed that the $290 billion expired in
about two years, meaning there was a time press for AIDEA
to be ready and able to provide match for the federal
funds. In terms of projects that would be brought forward,
each project would go through a due diligence process and
would go to the AIDEA board with an opportunity for public
comment and with legislative oversight. The projects ranged
from Bokan Mountain in Southeast Alaska to Graphite One
toward Nome and further out. He relayed that AIDEA did not
know which projects would come forward and apply, but the
agency had to be ready on a short timeline.
10:16:20 AM
Co-Chair Foster believed there would be more questions on
the AIDEA section. He would add the bill to the afternoon
meeting agenda. He thanked the presenters.
HB 122 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:17:06 AM
The meeting was adjourned at 10:17 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ARRC_MEMO_2024_bond_request 3.20.24.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |
| HB 122 Sponsor Statement 3.20.24.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |
| HB 122 Public Testimony Rec'd by 042824.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |
| HB 122 Support Royal Caribbean Design Flip Book 3.20.24.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |
| Sectional Analysis HB 122 3.20.24.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |
| Summary of Changes for Committee Substitute HB 122.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |
| HB 122 AIDEA Bonding Authority Backup 042924.pdf |
HFIN 4/29/2024 9:00:00 AM |
HB 122 |